Richardson Environmental Services Ltd. provides reclamation advice to clients, related to either well sites or pump...
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Richardson Environmental Services Ltd. provides reclamation advice to clients, related to either well sites or pump stations. The company's budgeted income statement for the year ended December 31, 2023 is shown below. Richardson Environmental Services Ltd. Budgeted Income Statement For the Year Ended December 31, 2023 Total Professional fees (a) $475,000 Fixed expenses Salary Richardson 84,000 Salary Assistants (2) 120,000 Supplies 60,000 Occupancy 100,000 Communications 30,000 Client relations 40,000 434,000 Inc. before taxes (b) 41,000 Inc. tax exp. 8,200 Net income $32,800 The firm's staff consists of one employee-owner (Richardson) and two assistants. Annual budgeted hours for each employee is 2,000. The firm expects to complete four well site files and 50 pump station files during fiscal 2023. At present, fees are based on time spent on each file by Richardson. Her hourly charge-out rate is $250. Average estimated hours to complete a well site file is 100 hours for Richardson and 50 hours for an assistant. Average estimated hours to complete a pump station file is 30 hours by Richardson and 70 hours by an assistant. The remaining hours will be used for other necessary (but unbillable) activities. Relevant allocation information is as follows: Allocation basis Type of fixed Activity Richardson Assistants Total expense Supplies Supplies used 40% 60% 100% Occupancy Space occupied (m) 30 20 50 Communications # incoming calls 200 800 1,000 Client relations # clients entertained 10 0 10 Required: Using time-driven activity-based costing, calculate the time equations for Richardson and the assistants that will produce equal pre-tax profit percentages for each of the two types of reclamation advising service. Richardson Environmental Services Ltd. provides reclamation advice to clients, related to either well sites or pump stations. The company's budgeted income statement for the year ended December 31, 2023 is shown below. Richardson Environmental Services Ltd. Budgeted Income Statement For the Year Ended December 31, 2023 Total Professional fees (a) $475,000 Fixed expenses Salary Richardson 84,000 Salary Assistants (2) 120,000 Supplies 60,000 Occupancy 100,000 Communications 30,000 Client relations 40,000 434,000 Inc. before taxes (b) 41,000 Inc. tax exp. 8,200 Net income $32,800 The firm's staff consists of one employee-owner (Richardson) and two assistants. Annual budgeted hours for each employee is 2,000. The firm expects to complete four well site files and 50 pump station files during fiscal 2023. At present, fees are based on time spent on each file by Richardson. Her hourly charge-out rate is $250. Average estimated hours to complete a well site file is 100 hours for Richardson and 50 hours for an assistant. Average estimated hours to complete a pump station file is 30 hours by Richardson and 70 hours by an assistant. The remaining hours will be used for other necessary (but unbillable) activities. Relevant allocation information is as follows: Allocation basis Type of fixed Activity Richardson Assistants Total expense Supplies Supplies used 40% 60% 100% Occupancy Space occupied (m) 30 20 50 Communications # incoming calls 200 800 1,000 Client relations # clients entertained 10 0 10 Required: Using time-driven activity-based costing, calculate the time equations for Richardson and the assistants that will produce equal pre-tax profit percentages for each of the two types of reclamation advising service.
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Auditing Cases An Interactive Learning Approach
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